Dish Network vs. Fox dispute could get worse

Dish Network is promising not to back down in its fight with News Corp. over fees — and that may push more stations off the satellite broadcaster’s lineup Nov. 1.

And even if the News Corp. situation is resolved, Dish Network and others predict paid TV distributors will lose more stations by refusing what Dish calls unreasonable hikes in the cost of programming it carries.

“We’ve all come to the point where our viewers say ‘enough,’” said Dave Shull, senior vice president of programming at Douglas County-based Dish Network. “We’re really trying to draw a line in the sand before these increases become truly insane.”

News Corp.-owned Fox Regional Sports channels were pulled off Dish Network on Oct. 1 in 19 markets — not including Denver — after Dish refused what it said was a more than 50 percent cost increase to carry the channels. News Corp.’s FX and National Geographic channels also were dropped from Dish Network lineups offered to 14.3 million customers nationwide.

News Corp. didn’t respond to an email seeking comment for this story.

The dispute has sports fans from Miami to Minnesota fuming about missing basketball and hockey action. Texas A&M is offering burned Dish Network customers half-off tickets for the football game in College Station against nationally ranked Missouri on Saturday, Oct. 16.

Now, according to Dish Network (NASDAQ: SATS), it faces the prospect of News Corp. blacking out its Fox Broadcast stations starting Nov. 1 unless they can agree on a contract.

Shull said Oct. 13 the sides were still far apart in negotiations, and News Corp.’s “scare tactic” of shutting off company-owned Fox Broadcast stations didn’t bring them any closer.

News Corp. doesn’t own Denver’s KDVR Fox 31 station.

Fights over fees have occurred since the advent of paid television. Program disruptions, however, have been rare until recently.

Economic and media trends have triggered a record number of programming blackouts in the past year.

A dispute between Comcast Corp. and DirecTV kept the Comcast-owned sports channel Versus off DirecTV satellite lineup for seven months, ending in January.

A fee face-off between Cablevision and Disney knocked the New York City-area ABC affiliate off the cable company’s lineup for a few hours March 7, triggering an outcry after 3.1 million viewers missed the opening minutes of the Academy Awards.

It’s riskier than ever for satellite and cable companies to pass along rising costs to viewers. The economy is making many consumers re-think paying for TV.

The industry lost 216,000 subscribers in the second quarter of 2010, according to Monterrey, Calif.- based SNL Kagan. It was the first time in TV history that the number of paying customers declined.

Cable and satellite companies would rather refuse to carry channels on more expensive terms than risk chasing away customers or cutting further into their profits.

Dish Network’s second-quarter costs jumped 7.6 percent in 2010 to $1.6 billion due to programming increases, while its average monthly revenue per customer, $73.05, rose only 3.3 percent in the quarter. The rest of the programming price hikes ate into Dish Network’s bottom line.

Dish believes it will come out of its dispute with News Corp. in better shape for having taken a stand.

“For the [satellite broadcast] companies, it’s very frustrating,” he said. “They have to fight, but the question is how much do you fight, and what’s your leverage?”

News Corp. has a lot more to gain than lose in being tough, because 85 percent of the revenue that regional sports networks make comes from what they charge cable and satellite providers, Baine said.

Shull said News Corp. tried to justify charging more for its regional sports channels by saying it needs to raise money to outbid sports team owners for broadcast rights, and to stop the spread of sports franchise-owned television networks.

Now, the owners of network broadcast stations have been demanding fees for channels for which cable and satellite companies have paid little or nothing.

News Corp. President Chase Carey was quoted by Reuters wire service saying Fox Broadcasting stations are worth upward of $5 per subscriber per month, a price that would exceed ESPN, which is the most costly station for cable and satellite systems to carry.

That’s partly driven by the rise in streaming video on the Internet through sites such as Hulu and Netflix, said Marvin Ammori, assistant professor of telecom law at the University of Nebraska.

Cable and satellite companies want exclusive distribution rights, and programmers are demanding big premiums to sign multiyear contracts that keep their content off the Internet, he said.

“The time to strike for both sides is now,” Ammori said, “That, and the economy, is why we’re seeing so much of this going on.”